OPW INTERVIEW - Apr 7 - Paul Larsen of Paul Larsen Consulting helps recurring “Card Not Present “ merchants increase revenue.
Anne Holland referred me to Paul and told me he was a wizard with payment processors. So I thought I’d interview him for you. - Mark Brooks
You have quite an unusual focus with your consultancy. Tell us more. What do you do, Paul?
Primarily, we help subscription merchants meet and overcome customer churn caused by credit card problems. We help them hold onto their customers and we do a few other things along the way – reduce fraud, reduce chargebacks, help them become PCI compliant and help them lower fees.
More specifically I understand your sub specialty is working with card not present.
Yes, we work almost exclusively with what we call card not present, recurring or subscription merchants.
What is your background Paul? How did you get to be doing what you’re doing now?
We were on the merchant side ourselves for 13 years. We helped build and develop the system and the policies and procedures for what came to be the world’s largest magazine subscription company from 1994 to 2003).
That company was called Synapse and was purchased by Time Warner and today is a division of Time, Inc. But it was during that time when we incubated and developed many of the best practices that we were able to bring to bear for more effective performance in credit card processing over time.
Now I understand you’ve worked with the Internet dating industry in the past. Who have you worked with?
We’ve worked with Match.com, Spark Networks, ChristianCafe.com, Speeddate, True.com. Those are just a few of the dating companies that we have worked with - and a number of those we continue to work with today.
What have you helped them achieve?
Primarily higher retention rates and that’s really why we exist. We want to be able to help them overcome the challenges of credit card breakage and thereby help improve their retention rate. And again, we also help them reduce fraud and chargebacks. We help them lower their fees through more incisive processing and more integral partnerships with their processors.
What are the most common problems you encounter specific to the Internet dating industry?
The problems are mostly generated by what we call environmental events. 72 million credit and debit cards were reissued last year. That’s 28% of all consumers receiving a replacement card. Banks are flipping portfolios in the United States quite a bit. Last year SunTrust flipped its entire debit portfolio of 6MM cards from Visa to MasterCard and this year Sovereign Bank is doing the same thing. Any time you hear a news headline about cards being re-issued you know that’s not good for a subscription company.
Greater than 1 in 5 Americans are missing a credit card payment each year and with the economy being what it is, credit has been reduced and so credit limits are challenged. All credit cards around the world are reissued every 3 years or so and that’s a significant problem for subscription merchants.
Now, of course, the latest is the invasion of prepaid cards into the subscription industry. That is challenging because most of them are not reloadable and so therefore there is not much lifetime value attributable to a customer who begins a relationship with a dating merchant on a prepaid card.
Are you a fan of prepaid cards?
Personally I am. I like to receive them and use them but I would say most merchants these days are being crushed by it. They have maybe a lower priced intro offer, under $25, under $30 and the demography thereafter has lots of prepaid cards. They use it on the initial sale and then, of course, there won’t be any successful recurring charge because their prepaid card has been spent. The average value on a non-reloadable gift card is $33.
But we help merchants understand what to do in order to minimize the consequences of these events. Our goal is to move our clients, especially our dating clients to a position of strength corporately because of their credit card process and not despite it.
What would you say would be the biggest opportunity that you think the Internet dating industry is missing out on when it comes to payment processing?
So I could go blue sky here and talk about mobile payments and other trendy things. With mobile payments, especially in the United States and the UK, people are still trying to figure out what that means and how to take advantage of it. But really, the biggest opportunity is the optimized utilization of the best practices that have been made available to help subscription merchants overcome the challenges related to fraud, re-issuance, delinquency, credit limits, etc. There’s a lot of blocking and tackling involved but it’s surely worth it.
How can people work with you and what do you charge?
We work with companies in 2 different ways. There are organizations that have fully engaged staff in-house that is charged with paying attention to this and making sure credit card processing is optimized. Those companies often reach out to us and just simply ask for an audit of best practice usage. Match.com is one of those companies.
The other way is an approach that is more relationship oriented. We begin almost every relationship with an audit so we can see what they’re doing. Right then we understand what they can improve. Most companies will need some ongoing attention to implement best practices and sharpen the ones they have.
Let me pose a scenario for you. Say if I was running an Internet dating company based in the USA that had revenues of $20 million a year. What roughly would you want to charge me as an upfront and then as a retainer if we’re looking at a 2 year agreement?
We usually charge around $5,000 for the audit and then for our active involvement with customers we charge under $2,000 a month.
We’re very active in our relationships with customers. We help them either utilize and interpret reports that their processors make available or build their own reports internally that give them a clearer idea about how they are performing.